Today Google threw down the gauntlet to challenge AWS public cloud supremacy by announcing significant price reductions across its Google Cloud Platform. The eye-opening price cuts covered compute (32-percent reduction), storage (68-percent reduction), and BigQuery (85-percent reduction). Google also signaled that future reductions could follow Moore’s Law — citing that historically public cloud prices have dropped only 6 to 8 percent annually as compared to 20- to 30-percent reductions in hardware prices.

Even more significantly, Google announced new sustained-use pricing for compute services that will offer a simpler and more flexible approach as compared to the complexity of reserved instance pricing from AWS. Sustained-use pricing will discount the on-demand baseline hourly rate automatically as a particular instance is used for a larger percentage of the month — tiering the hourly rate down as you hit 25 percent, 50 percent, and 75 percent of time in a month. At 100 percent usage, customers will save 30 percent on Google baseline rates.

With Google's new sustained-use pricing, you will save 30 percent on Google baseline rates at 100 percent usage.

Google, in an attempt to simplify the complexity of AWS reserved instance purchase decisions, requires no commitment or upfront investment to qualify for sustained-use discounts. Instead, Google’s sustained-use pricing will be automatically calculated and applied to a Google user’s monthly bill based on the user’s level of sustained-use on the same instance types. Google has indicated that the majority of its cloud customers run servers for 90-100 percent of the time, and will therefore automatically receive the maximum level of discounts. This removes the pain of having to predict usage in advance, paying up front, and suffering the lock-in that goes with it.

To help cloud users better understand these pricing changes, RightScale has analyzed Google vs AWS pricing for compute services. We compared pure on-demand pricing between Google and AWS as well as Google sustained-use pricing vs AWS reserved instances (RIs). If you want to analyze the impact of Google prices on your own cloud spend, get a free trial of RightScale Cloud Analytics to analyze your past usage and create scenarios to forecast future spend on Google or other clouds.

On-Demand Pricing Comparison: Google vs AWS

First, we compared Google’s on-demand baseline rates (assuming 0-25 percent usage) to on-demand rates for similar instance types on AWS. We compared instance types based on the number of CPU cores. However, it is important to note that some of the AWS instances have more memory than the comparable instance types on Google, so you may need to adjust your comparison for memory-intensive use cases. In all the cases that we analyzed for on-demand, Google was significantly cheaper — saving customers 38-60 percent compared to AWS rates. In addition, if your usage extends past 25 percent of time during the month, you will automatically get a lower rate with Google, while AWS users would need to purchase reserved instances to achieve a lower rate. If AWS users don’t purchase RIs, the savings with Google grow further.

However, it is important to note that buying AWS reserved instances requires a one-year or three-year commitment for the same instance type with the same operating system in the same region. If AWS hourly on-demand rates go down during the three years, you will not get the lower price. AWS does sometimes reduce hourly pricing for reserved instances, however, looking at historical precedent, AWS does not always apply these savings to your already purchased RIs. In contrast, Google sustained-use pricing is calculated as a percentage of the on-demand baseline rate. As Google’s baseline rates go down, the sustained-use prices will fall as well.

As a result, all future Google price drops are passed on to all customers immediately when they take effect. Given the continual price reductions in cloud pricing, you may find that the ability to take advantage of future Google price drops might bring the price below even AWS three-year heavy reserved instances.

What About Storage?

Its important to note that AWS instances include SSD storage, while Google Compute instances do not. Some cloud users run stateless servers and therefore don’t take full advantage of instance storage. However, cloud users that use instance storage would need to take this into account when comparing AWS and Google prices.

In a future blog post, we will analyze the new Google storage prices vs AWS. An initial look shows that Google Cloud Storage could offer savings compared to AWS S3.

Simplicity, Flexibility, Predictability

The new Google sustained-use pricing avoids the complexity, lock-in, and upfront costs of AWS reserved instance purchases. Google users will automatically receive the best price for their level of usage, with no planning required on their part. However, tying the sustained-use discounts to Google’s monthly billing cycle could create an incentive to make decisions such as switching instance sizes on the monthly billing boundaries.

Similar to on-demand pricing with any cloud provider, unless you have an accurate forecast of your cloud usage, it may be hard to predict in advance what the exact monthly costs will be with Google sustained-use pricing. If this usage and the accompanying costs could be predicted more accurately, IT teams could allocate the savings to other projects or additional cloud capacity.

Check out RightScale Cloud Analytics, which can help you analyze past usage and create multiple scenarios to forecast future spend on Google or other clouds. We’ve been working hard to include these Google price cuts as well as sustained-use pricing in RightScale Cloud Analytics. As of today you can forecast your cloud spend in Cloud Analytics Scenario Builder and apply either the baseline price or the 75-100 percent sustained-use price tier. We’ll be adding the other sustained-use tiers shortly.

Bottom Line: For many cloud users, Google now offers significantly lower prices for compute resources. However, our whitepaper Cloud Pricing Trends shows that AWS has been aggressive in price cuts as well, and we certainly have not seen the last salvo in the cloud price wars. If AWS follows suit with price reductions, chalk up a win for cloud users.

Hi George, for the Reserved Instances comparison tables, yes they do include the upfront costs also. The upfront cost of the Reserved Instances shouldn't be ignored in my opinion, since you are paying and committing to the term to get that lower hourly price. If you do ignore the upfront cost, they hourly prices for Google at 100% sustained-use doesn't quite match AWS Heavy Reserved Instance Hourly prices, you can see these in the RightScale Cloud Analytics Scenario Builder screenshot.
Cheers,
Hassan